Investors keen on diversifying their portfolios are looking at niche sectors with great potential, experts agreed at Real Asset Media’s Advanced Manufacturing: an innovation investment opportunity briefing, which took place online recently on the REALX.Global platform.
“Innovation districts are coming into their own as the funders are waking up to the opportunities they offer,” said Paul Broad, director, sales & leasing, Avison Young. “They tend to be specialist investors with a long-term perspective, which is crucial in this sector.”
Real estate investors have embraced diversification and shifted their focus to new alternative asset classes like life sciences. Some of the more forward-looking ones are now looking at advanced manufacturing as well, a new niche sector that has its own characteristics.
“It can be called a niche sector because the capital investment in the equipment is far superior to the value of the real asset and it’s what drives the investment,” said Broad. “There could be hundreds of millions of pounds’ worth of equipment in a building which might be worth tens of millions.”
The presence of a multi-business, multi-sector, University-anchored cluster de-risks the investment and makes it more attractive. Glasgow’s innovation hub is an example.
“We have a queue of investors wanting to come here for the opportunities they can find to invest in deep tech,” said Professor Sir Jim McDonald, principal & vice-chancellor, University of Strathclyde. “Even conservative investors like pension funds are being educated about the potential of new sectors.”
Providing world-class facilities and the right infrastructure is key in attracting occupiers as well as investors.
With infrastructure in place occupier interest is strong
“For 10 or 15 years working on business parks you had to chase the occupiers, but here all the elements are in, the infrastructure is in place, including green energy, so there is strong interest from the occupiers already,” said Broad. “All we need is the right development partner.”
In Glasgow attention has been paid to the kind of buildings that could stand the test of time, both from a sustainability and from a tenants’ needs perspective.
“We looked at best practice around the world and tried to avoid the mistakes others had made,” said Keith Ridgway, executive chair, National Manufacturing Institute Scotland (NMIS). “We’ve built large, flexible spaces that are adaptable from the very beginning so they don’t need to be changed later.”
Demands change constantly in fast-evolving industries, but an innovation hub must always provide working spaces as well as collaboration and meeting spaces. It’s the buildings as well as the context.
“Innovators and R&D type of occupiers need flexible spaces, maybe a small office but large break-out areas. Bumping into people and exchanging ideas is very important in knowledge-based industries, it’s what we call the watercooler effect,” said Broad. “Delivering the cluster is crucial and it’s the reason why people come to Glasgow.”
Location is also key, and in Glasgow’s case the hub’s closeness to the University and its proximity to the city centre are important factors for investors and occupiers.